British arms-maker BAE Systems and the European aerospace consortium EADS have abandoned their merger discussions, the companies announced Wednesday, blaming the inability of the European governments involved to agree to a deal.

“Notwithstanding a great deal of constructive and professional engagement with the respective governments over recent weeks, it has become clear that the interests of the parties’ government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger,” the companies said. “BAE Systems and EADS have therefore decided it is in the best interests of their companies and shareholders to terminate the discussions and to continue to focus on delivering their respective strategies.”

The companies said they had made progress in talks between their respective corporate leaders, but one major sticking point appeared to be the amount of control that the governments of France, Germany and the United Kingdom would retain in the new joint venture, which would have been the largest aerospace company in the world.

Not only that, the UK press reported that German Chancellor Angela Merkel vetoed the merger because she had “deep concerns” about merging a civil aircraft manufacturer — EADS owns passenger-jet builder Airbus — and a major defense contractor. The UK’s Guardian newspaper also reported that the French and German governments also could not agree on where the new company should have its headquarters.

“We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders, said BAE CEO Ian King. “We believe the merger presented a unique opportunity for BAE Systems and EADS to combine two world class and complementary businesses to create a world leading aerospace, defense and security group."

The companies said they believed their attempted merger “was based on sound industrial logic” and the resultant aerospace and defense giant would have “produced a combined business that would have been a technology leader and a greater force for competition and growth across both the commercial aerospace and defense sectors and which would have delivered tangible benefits to all stakeholders.”

Talks had gotten as far as “agreements on commercial terms,” the legal structure of the merger, “governance arrangements,” management structure, strategy, “near-term dividend policy” and “cost saving and revenue benefits,” according to the statement.

Still, “Discussions with the relevant governments had not reached a point where both companies could fully disclose the benefits and detailed business case for this merger” — possibly one reason for the belief earlier this week that that EADS and BAE would ask for more time to negotiate. After leaks and rumors that the discussions weren’t going well leading up to a market deadline on Wednesday, the companies were initially expected to ask for another week or two weeks.

EADS CEO Tom Enders echoed King’s lament, but he hinted the companies could collaborate again down the line: “It is, of course, a pity we didn't succeed but I'm glad we tried. I'm sure there will be other challenges we'll tackle together in the future.”

This article first appeared on POLITICO Pro at 8:42 a.m. on October 10, 2012.